CCS competition launched by UK government

The UK Government has relaunched a £1 billion competition to encourage companies to develop technology that captures and stores carbon from power stations.

It is the second time the Government has attempted to get carbon capture and storage (CCS) off the ground, after a previous bid ended in failure when plans for the technology at Scottish Power's coal plant at Longannet, Fife, were abandoned.

Ministers are depending on getting the technology, which can capture up to 90 per cent of carbon emissions and then permanently store them underground, working at scale as a major part of decarbonising electricity generation by 2030.

This time the £1 billion in funding will be available to a wider range of projects, including gas power stations and even industrial plants involved as part of group schemes, to develop CCS at commercial scale between 2016 and 2020.

The Government also announced £125 million for research and development of the technology.

And ministers said reform of the electricity market would bring in long-term contracts for power, which guarantee a steady rate of return for low-carbon generation, that would be available to CCS to drive investment in the sector.

Energy and Climate Change Secretary Ed Davey said: "The potential rewards from carbon capture and storage are immense: a technology that can de-carbonise coal and gas-fired power stations and large industrial emitters, allowing them to play a crucial part in the UK's low carbon future.

"What we are looking to achieve, in partnership with industry, is a new world-leading CCS industry, rather than just simply projects in isolation - an industry that can compete with other low-carbon sources to ensure security and diversity of our electricity supply, an industry that can make our energy intensive industries cleaner and an industry that can bring jobs and wealth to our shores.

"The CCS industry could be worth £6.5 billion a year to the UK economy by late next decade as we export UK expertise and products."

Although the competition for up to £1 billion for the technology collapsed last year when the Government could not come to a deal with ScottishPower over the last remaining option at Longannet, companies today lined up to compete for funding.

The Don Valley CCS Power Project in South Yorkshire aims to capture carbon from a 650MW coal plant, enough to power one million homes, pumping it out to sea to help recover "hard to reach" oil and storing the gas in depleted oil fields.

It is backing a "cluster approach" which would eventually see shared pipelines used by multiple power plants and industrial emitters in the Humber area.

Lewis Gillies, chief executive of 2Co Energy, the company behind the project, urged the Government to support projects that were ready to go.

"The Don Valley Power Project is the best place in the UK to kick-start a new carbon capture industry and export those skills around the world," he said.

The UK's biggest power station, Drax, is in a separate bid for funding with Alstom and BOC to develop a CCS coal scheme - with the potential to burn biomass with it - at the Yorkshire site to power 630,000 homes.

Their proposal, which would see 90% of carbon captured and stored under the North Sea, could also ultimately feed into the wider Humber Gateway project backed by National Grid.

And Scottish and Southern Energy (SSE) and Shell are in a joint scheme to develop the technology at SSE's gas-fired power station in Peterhead, Aberdeenshire.

Responding to the announcement Rhian Kelly, director for business environment policy at leading business group CBI, said: "While we welcome today's announcement, the Government must learn lessons from its previous competition, which took too long and was eventually abandoned.

"This time around the competition must be simpler and completed as quickly as possible.

"CCS has the potential to contribute significantly to our energy security, reduce carbon emissions, create jobs and become a major UK export for the future.

"If we are to gain any advantage from developing this important technology in the UK, the Government cannot afford to waste this opportunity."

Companies have until July to submit a bid, before a decision on which projects will go ahead is expected in the autumn. Schemes will have to be operational by between 2016 and 2020.

Projects are also able to bid for European funding, which would see them up and running by 2016.